New players may get to sell subsidized fuels

Ika Krismantari, The Jakarta Post, Jakarta

Downstream oil and gas regulator BPH Migas may allow Dutch-based oil giant Shell and Malaysia's Petronas to join state-owned oil and gas firm Pertamina in selling subsidized fuels.

BPH Migas representative Adhi Subagio Subono told The Jakarta Post on Tuesday that the designation of Shell and Petronas as subsidized fuel distributors, despite their lack of storage facilities, would benefit consumers as the increased competition would force Pertamina, currently the sole distributor of subsidized fuels, to provide better services and reduce prices.

"New players could establish joint storage facilities, or if Pertamina agreed, they could share Pertamina facilities to overcome their lack of space," Adhi said.

Pertamina still holds the exclusive right to distribute subsidized fuels, despite the partial liberalization of the country's retail fuel market in 2005.

The government has said that the exclusive right continued to be awarded to Pertamina as no other operators had been able to meet the requirements, such as having sufficient distribution networks and storage facilities.

As a result, the newcomers, including Shell and Petronas, have only been able to sell non-subsidized high-octane gasoline in Indonesia.

BPH Migas has not decided whether to hold a tender or to resort to the direct appointment mechanism to select the distributors of subsidized fuels for next year.

As a result, the appointment of distributors, which should have been announced in August, has been delayed.

A committee made up of BPH Migas, the Finance Ministry and the Energy and Mineral Resources Ministry is still discussing a number of contentious issues, which are reported to include policy changes so as to allow more players to become involved in the distribution of subsidized fuels.

Adhi said that the other mechanism being discussed involved a competitive tender under which the winners would be selected based on the price margin offered and the scope of their distribution areas.

Only those bidders that offered lower price margins and wider distribution areas would be allowed to sell the subsidized fuels, he added.

Pertamina marketing and trading director Ahmad Faisal said Tuesday that his company had sent a letter to BPH Migas to express its readiness to serve as the distributor of subsidized fuels next year.

Indonesia, with a population of some 220 million people, represents an attractive market for gas retailers as motor vehicles account for almost half of national fuel consumption, which currently stands at some 60 million kiloliters per year.

A number of oil giants, such as U.S.-based Chevron and French oil firm Total, have been lining up to enter the country's retail fuel market, but are still waiting for the government's latest decision on subsidized fuels, which account for 95 percent of Indonesia's fuel market.